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(Kitco News) - A rare convergence of gold demand from both Eastern and Western economies is fueling a significant rally in the precious metal, and silver is on the cusp of a major move back to its all-time highs, according to Tavi Costa, Partner & Macro Strategist at Crescat Capital.
Speaking at the PDAC 2025 conference in Toronto, Costa told Kitco News that historical comparisons suggest a dramatic revaluation of gold could be in store.
Costa highlighted his firm's recent report, which examines the potential for gold prices to reach extraordinary levels if the U.S. were to revalue its gold inventory relative to outstanding Treasuries.
"To me, it comes down to the treasury. How much treasuries are outstanding out there - 36 trillion. How much do we own of gold?" Costa stated.
Currently, the value of U.S. gold reserves is about 2% of those Treasuries outstanding, compared to roughly 17% in the 1970s and close to 40% in the 1940s.
"And if we're going to go back to the 17%, it takes us back to $25,000 dollars an ounce, or if we go back to the 40%, it's close to $55,000 an ounce," Costa explained, noting that these are not price targets but serve to illustrate the potential for significant valuation shifts.
He pointed out that central banks have been accumulating gold at 50-year highs since the global financial crisis, while U.S. gold reserves are at their lowest levels in 90 years. This divergence, Costa suggests, could pressure the U.S. to reconsider its gold policy.
Costa also expressed strong concerns about the overvaluation of the U.S. dollar, stating it is likely at its peak and at its most overvalued levels in history versus other currencies. He drew parallels to historical instances of dollar devaluation, such as the Plaza Accord in 1985 and the events of the 1930s.
"What we do know is that the dollar is at its peak, most likely. And that's the key part of it. So, as an investor, you think, what do I do in that scenario?" he said. He suggests that a weaker dollar would be a "green light to a lot of asset classes that have been ignored for a long time," including emerging markets and natural resources.
Regarding silver, Costa sees it as being "on the verge of a significant move back to its all-time highs." He noted positive short-term price action and believes the derivatives of gold, including silver, are looking very attractive near term.
"It wouldn't surprise me if we see a jump in silver prices to finally close at a quarterly high in terms of the candle. A quarterly high would be around $40," Costa stated.
He believes the historical "cup and handle" formation in silver suggests a potential breakout is near. Furthermore, Costa highlighted the constrained supply of silver and increasing demand.
Given his outlook on the dollar and precious metals, Costa recommends a rebalancing of investments away from the tech space towards commodities and emerging markets. He pointed to the high valuation of U.S. equities compared to emerging markets. Costa also observed the significant cash position of investors like Warren Buffett, suggesting a potential redeployment of capital when more attractive valuations emerge.
Story by Anna Golubova, Kitco
